Nov. 11 (Bloomberg) -- Sinochem Corp. plans to raise as
much as 35 billion yuan ($5.5 billion) in an initial public
offering to fund an oil refinery project, in what would be
China’s sixth-biggest IPO.

The country’s largest supplier of chemical products aims to
sell as much as 26.5 billion new shares in Shanghai, according
to a statement posted on the Ministry of Environmental
Protection’s website yesterday. The unit of Sinochem Group will
use the proceeds to finance a 12 million metric-ton-a-year, or
241,000 barrel-a-day, refinery in Fujian, the statement said.

Companies have raised $37 billion in China IPOs this year,
more than double the proceeds in Hong Kong, according to data
compiled by Bloomberg. The Sinochem IPO comes less than a month
after Sinohydro Group Ltd., the country’s largest builder of
hydroelectric dams, raised 13.5 billion yuan in what was the
biggest offering this year, Bloomberg data show.

“This will open up the floodgates for IPOs,” said Sandy
Mehta, chief executive officer at Hong Kong-based Value
Investment Principals Ltd. Chinese stocks “are very cheap in
terms of valuation, and the bearishness on the economy and banks
is way overdone. China has now stopped tightening,” he said.

The benchmark Shanghai Composite Index has slumped 11
percent this year as China raised interest rates and curbed bank
lending to tame inflation. Sinohydro has fallen 6.8 percent
since it started trading on Oct. 18.

Inflation cooled in October, while home sales fell and
industrial output grew at the slowest pace in a year. Most
economists expect China to loosen fiscal or monetary policy
without cutting interest rates, a Bloomberg survey showed.

Refining in China

State controls on fuel prices in China mean refiners can’t
fully pass on crude costs to consumers. The government may allow
fuel suppliers including China Petroleum & Chemical Corp. and
PetroChina Co. to adjust prices on their own, China Securities
Journal reported on Nov. 4, citing an unidentified person.

“The key is China’s policy changes when Sinochem’s Fujian
plant is completed in a couple of years,” said Shi Yan,
Shanghai-based energy analyst at UOB-Kay Hian Ltd. “If higher
retail prices are allowed, the plant will be very profitable.”

Sinochem, based in Beijing, is China’s fourth-largest oil
company and also has assets in agriculture and real estate,
according to its website. The company said it had a profit of
9.1 billion yuan last year on 335.3 billion yuan of revenue.

Sinochem Group

Its parent is listed as a key state-owned company under the
nation’s State-owned Assets Supervision and Administration
Commission of the State Council. Sinochem Group, China’s largest
fertilizer trader, was named as a potential bidder for Potash
Corp. of Saskatchewan Inc. last year during BHP Billiton Ltd.’s
failed $40 billion takeover offer.

The group had explored taking a majority stake in Saskatoon,
Saskatchewan-based Potash Corp. and was looking to involve
Canadian pension funds or other Canadian investors to boost
support for a deal, people familiar with the plan said last year.

Sinochem is the parent of a number of listed companies such
as Sinochem International Corp., Sinofert Holdings Ltd.,
Franshion Properties China Ltd. and Far East Horizon Ltd.,
according to the website.

China Railway Materials Commercial Co. is also planning an
initial public offering to finance 14.7 billion yuan of projects,
according to a statement from the company posted on the Ministry
of Environmental Protection’s website yesterday.